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Fixed-rate mortgages. Planning certainty as standard.
What is a fixed-rate mortgage?
A fixed-rate mortgage is one of three different types of mortgage. The interest rate is fixed in advance for a set term of two to twenty years. The fixing of the rate without the right of termination provides both borrowers and lenders with a high level of planning certainty. The monthly interest instalments remain constant over the whole term, regardless of fluctuations on the interest rate market. One of the main advantages is that fixed-rate mortgages offer protection against rising interest rates.
What factors determine the interest rate for a fixed-rate mortgage?
If a lender issues a property owner with a mortgage, it bears the risk of default on the part of the borrower and so requests money for the security granted. As a result, the creditworthiness of the borrower plays a role in the cost of the mortgage. There are also refinancing costs which the financial institution is required to pay in order to ensure it has the required funds itself. This might be customer savings or funds from the capital market, which are subject to market fluctuations. The longer the term of the mortgage, the greater the interest rate risks are on the market and the more money the lender requests for the corresponding security. Finally, administration costs and profit margins also determine the interest rate for a fixed-term mortgage.
Which requirements do I need to satisfy in order to take out a fixed-rate mortgage?
With fixed-rate mortgages, there are two main requirements that must be met. The loan-to-value ratio refers to the relationship between to the sum of the loan and the value of the property, which is determined by the lender. In most cases, banks will finance up to 80% of the property value by means of a mortgage. Affordability criteria must also be fulfilled. In other words, a person’s income must be three times higher than the interest costs (typically calculated at five percent), maintenance costs (calculated at around one percent of the property value) and any amortisation payments.
What others wanted to know.
Our mortgage experts give an insight into a selection of the most frequently asked questions. Submit your own question. We will be happy to help you.
Maria S. (32), Olten
What term can I choose for a fixed-rate mortgage?
When taking out a fixed-rate mortgage, you can normally choose a term between two and twenty years. The most popular terms are between two and ten years, with a ten-year fixed-rate mortgage the most popular choice of mortgage among the Swiss population. Shorter terms often offer lower interest rates; while they guarantee more planning certainty, longer terms tend to involve higher interest rates. Your choice of term depends on your personal financial goals, market trends and your risk tolerance.
Patrick A. (37), Langenthal
How is a fixed-rate mortgage amortised?
A fixed-rate mortgage is typically amortised either fully or partially through regular repayments. The amortisation amount depends on the agreed repayment rate and your financial situation. Annual payments are common and are made either in the form of fixed instalments or a mix of interest and principal repayments. Amortisation can also be a flexible process and be adapted to changes to income, provided the agreed terms continue to be met.
Find out more about repayments
Nathalie W. (34), Horgen
What are the disadvantages of a fixed-rate mortgage?
One disadvantage of fixed-rate mortgages is the low level of flexibility. The interest rate does not respond to falling capital market interest rates and the term defined in advance cannot be ended early without a penalty being incurred. Depending on the lender, it’s possible to exit the fixed-rate mortgage free of charge or for a fixed fee upon the sale of the property. Transferring the fixed-rate mortgage to the buyer(s) or to another property is also possible under certain circumstances. In most cases, fixed-rate mortgages are also only issued by lenders from a certain minimum amount (typically around CHF 100,000).
Aurélia M. (29), Männedorf
When is a fixed-rate mortgage the right choice?
A fixed-rate mortgage is the right choice if you want long-term planning certainty and would like to protect yourself against rising interest rates. They are particularly suitable if you are aiming to establish a stable financial situation and know exactly how high the costs of your mortgage will be over the coming years.
Maria S. (32), Olten
What term can I choose for a fixed-rate mortgage?
When taking out a fixed-rate mortgage, you can normally choose a term between two and twenty years. The most popular terms are between two and ten years, with a ten-year fixed-rate mortgage the most popular choice of mortgage among the Swiss population. Shorter terms often offer lower interest rates; while they guarantee more planning certainty, longer terms tend to involve higher interest rates. Your choice of term depends on your personal financial goals, market trends and your risk tolerance.
Patrick A. (37), Langenthal
How is a fixed-rate mortgage amortised?
A fixed-rate mortgage is typically amortised either fully or partially through regular repayments. The amortisation amount depends on the agreed repayment rate and your financial situation. Annual payments are common and are made either in the form of fixed instalments or a mix of interest and principal repayments. Amortisation can also be a flexible process and be adapted to changes to income, provided the agreed terms continue to be met.
Find out more about repayments
Nathalie W. (34), Horgen
What are the disadvantages of a fixed-rate mortgage?
One disadvantage of fixed-rate mortgages is the low level of flexibility. The interest rate does not respond to falling capital market interest rates and the term defined in advance cannot be ended early without a penalty being incurred. Depending on the lender, it’s possible to exit the fixed-rate mortgage free of charge or for a fixed fee upon the sale of the property. Transferring the fixed-rate mortgage to the buyer(s) or to another property is also possible under certain circumstances. In most cases, fixed-rate mortgages are also only issued by lenders from a certain minimum amount (typically around CHF 100,000).
Aurélia M. (29), Männedorf
When is a fixed-rate mortgage the right choice?
A fixed-rate mortgage is the right choice if you want long-term planning certainty and would like to protect yourself against rising interest rates. They are particularly suitable if you are aiming to establish a stable financial situation and know exactly how high the costs of your mortgage will be over the coming years.
